LONG BEACH – With all of Southern California’s investment opportunities, it may seem surprising that Newport Beach developer Jeffrey S. Klein has set his sights on the lease to the Queen Mary complex – a property that has attracted controversy for nearly as long as the ship’s been in the Long Beach Harbor.

Then again, Klein is no stranger to controversy.

In his personal and professional life, the 57-year-old has amassed $700,000 in tax liens, $2.4 million in legal judgments and more than two dozen lawsuits against him over the last 12 years. Among them: a 1997 elder abuse and fraud case filed in civil court by his older brother, Robert Klein, famous in California for leading the 2004 stem-cell initiative.

City officials say they are aware of Klein’s past but are not concerned about his ability to develop land around the historic ship.

“There were some things that on paper looked very bad that were easily explained,” said Steven Gubner, the city’s bankruptcy attorney. “Unfortunately, in today’s world, anybody can sue anybody.”

During a recent interview, Jeffrey Klein spoke candidly about the elder-abuse case – which he called “completely bogus” and based largely on a dispute over his father’s will – as well as the tax liens and other lawsuits. He classified the suits as “ancient history” and said the taxes would likely be paid by the end of the year.

“You will find,” he said, “that I’m pretty much an open book.”

Still, Klein’s history could affect the sale of the Queen Mary lease, which he and his business partners agreed to purchase in a U.S. Bankruptcy Court auction for $43 million.

Working under the name “Save the Queen,” the group is set to close escrow Oct. 22, effectively replacing the bankrupt leaseholder, Queen’s Seaport Development Inc., which has been running the city-owned ship for nearly 15 years.

All is going forward as planned, officials have said, but QSDI’s bankruptcy trustee, Howard Ehrenberg, told the Press-Telegram that one of Klein’s lenders is sensitive to negative publicity and could still withdraw its financing if the information is released as such.

That’s not to suggest that Klein’s past is new to his lenders, to Ehrenberg or to city leaders.

Ehrenberg, whose job it was to broker the deal, said he was generally aware of the liens and lawsuits against Klein, and still considers them to be “not out of the ordinary for a real-estate developer.”

“I wouldn’t present to the city somebody that I knowingly believed was unqualified,” he said, but added: “It’s really more the city’s concern than it is mine. It’s the city who is approving the buyer, not me.”

City Attorney Robert Shannon said Gubner, his outside attorney, conducted exhaustive background checks on all the bidders several months ago. Both Shannon and Gubner said the priority – for now – is getting the deal closed.

“His background has not played a significant part in this,” Shannon said of Klein. “If they can show us the financing, then that’s going to be enough for the time being.”

Liens and lawsuits

When the city is ready to talk about Klein’s background, it could be a long conversation.

Klein has been the subject of nine tax liens worth more than $700,000 over the last 12 years, according to Westlaw records. Three of them, totalling $189,000, were filed this year.

He has also has been involved in more than 35 lawsuits – at least 25 of them where he or his companies have been named as plaintiffs. The suits stem from disputes in six counties, including Los Angeles, Orange, Riverside and Santa Barbara.

Judgments were entered against him in four cases reviewed by the newspaper for a total of $2.4 million. All of them involved alleged breach-of-contract or fraud claims, although none involved specific findings of fraud.

The lawsuit filed by his brother – a claim Klein adamantly denies – accused him of taking some $600,000 from his mother’s estate while she deteriorated from Alzheimer’s disease in a mobile-home park in Northern California. The case later was settled and both brothers since have reconciled.

In a recent interview, Klein said he was used to answering questions about his past.

Every time he buys new property, he said, he has to discuss the lawsuits and liens with the seller. He said he’s usually able to assuage concerns on a one-on-one basis, but acknowledged he can’t sit down with every resident of Long Beach and do the same with them.

“My reputation in this community is extremely important to me,” he said. “And I don’t want to distract people with implications or have questions floating around in their minds that I don’t have the opportunity to explain.”

He added: “Don’t penalize me or Save the Queen … for what I consider old, dirty laundry.”

Other projects

Klein’s resume alone is impressive.

The 57-year-old has been in real-estate development for 30 years, having started as a developer of commercial and industrial properties in Northern California, where his family partnered with Standard Oil to develop industrial parks and retail gas stations for many years.

He has since worked his way southward – settling in Newport Beach – and has developed a number of residential and commercial communities.

While he finances his deals through a family trust set up in his children’s name, he is the president of multiple entities – including Fletcher Development Company and Pacific Capital Holdings Inc.

The latter, he said, is a partner in the Snowmass Redevelopment Project in Aspen, Colo.; the Rancho Maria Golf Community in Santa Barbara; the Rancho Santa Margarita Residential Community; and a landfill project in Corona.

In 2002, Klein said, he merged his business interests with PBR, which has been involved in several destination-resort projects, including Universal Studios in Florida.

For Save the Queen, Klein partnered with Thomas Hix, president of Hix Rubenstein Companies, which specializes in golf course resort and residential developments. Hix could not be reached for comment.

On a personal level, Klein is engaging and often self-effacing.

He readily admits to being “an obnoxious, spoiled brat” out of USC in 1972 who parted ways with his father after a “blow-up” fight over the family business. And he proudly tells the story about a chance-taking banker who overlooked his bad credit in 1979 and loaned him $5,000 so that he could make his own way in the world.

The son of an Irish-Catholic mother and a Russian-Jewish father, who divorced when he was young, Klein has been married three times and has four children – the most recent of whom is a 16-month-old boy whose picture he proudly displays on his iPhone.

His youthful exuberance belies his age. He is quick to laugh and seems genuinely to enjoy the wheeling-and-dealing lifestyle of a real-estate developer – if not the scrutiny that comes with it. Even his full head of dark hair seems almost reluctant to turn gray.

Tax liens

Although Klein couldn’t speak about specific tax liens, he said he was in the process of negotiating a global settlement to resolve all of them and expected to pay them by the end of the year.

Most of the liens, he said, were the result of business deals that went sour and left him holding the financial burden.

“A lot of this was generated through no fault of my own,” he said, from “what I feel are other peoples’ obligations.”

Both Ehrenberg and Gubner said that was their understanding, as well, and indicated that the liens were little more than temporary distractions from the business at hand.

Klein’s tax attorney, Walter Drakeford, could not be reached for comment. But, in general, Klein attributed the tax disputes to two main problems – one personal, the other business.

Some of the liens, he said, trace back to his divorce settlement with his second wife, Cammie. During settlement negotiations, he said, the couple disagreed over who should have to pay their income taxes. By the time Klein agreed to do it, he said, the taxes had collected interest and penalties, which he then disputed.

Other liens, he said, arose because of what he called “relief of debt” – an accounting term that often refers to loans that have been forgiven. For instance, Klein said, a business associate once declared bankruptcy and left him with a debt, which then was counted against him as income by the IRS.

“That’s phantom income,” he said, “and the IRS can hit you as if it were income to you.”

That’s not accurate, however, according to Kirin Barnett, a trust expert with Smith Dickson and Accounting Corp. in Irvine.

Klein was generally dismissive of the lawsuits against him over the years, often referring to them as “ancient history.”

Out of the cases reviewed by the newspaper, some were dismissed or were the basis for cross-complaints filed by Klein. Others ended in confidential settlements.

But at least five of them resulted in judgments against Klein, four of which were reviewed by the newspaper.

The first, filed by Anthony Hoover in 1997, claimed fraud and breach of fiduciary duty, among other things.

At the time, Klein was a partner with Onjay Rabbani in Scotia Oil Co., which agreed to purchase Hoover’s interest in Dove Oil Co., as well as in Hoover’s two failing gas stations: Mission Arco and Sierra Shell.

In Orange County Superior Court, Hoover claimed that Klein and Rabbani agreed to take over the stations, manage them and pay off Hoover’s tax debt, but then later backed out of the deal.

The case went to arbitration, and Hoover won a $1.6 million judgment against both men. The judgment did not include a finding of fraud.

In the meantime, Klein filed a cross-complaint against Rabbani. And, for the next 10 years, Hoover tried to collect the debt, to no avail, records show.

The case came back to the courts in February of this year, when Hoover filed a fraudulent transfer lawsuit against Klein, alleging that Klein was avoiding payment by hiding his assets in his other companies.

Klein reached a confidential settlement with Hoover in May, although Klein told the Press-Telegram the amount was between $800,000 and $1 million and that he paid the money despite his strong belief that Rabbani was truly liable.

Other judgments

In 2001, Klein was among a number of entities served with a default judgment in a breach-of-contract and fraud case. The judgement totalled $192,726 and included $50,000 in punitive damages.

The suit, filed by Thomas Sinay of Double Eagles Properties, claimed that Klein and his business partners contracted with Sinay in 1997 to negotiate a land sale, introduce them to investors and take part in the development and construction of a project in Orange County.

Sinay said he was paid only $1,100 for the work, and that the plaintiffs benefitted by “hundreds of thousands of dollars worth of transactions.”

The other entities involved in the Sinay suit settled before trial, but Klein failed to appear, court records show, resulting in the default judgment against him.

The third default judgment was entered in a 1998 case involving Richard T. Burger, who claimed that Klein had promised to pay $400,000 on behalf of Lapis Energy Organization as part of a “continuing guarantee agreement” that came due in June 1998.

Judgment was entered against Klein in October 1999 for $481,590.

And, finally, a fourth judgment was filed in May 2001 on behalf of Harry Kim, who claimed that Klein failed to pay $190,000 on two promissory notes dating back to 1996. A judgement was entered against Klein in September 2001 for $204,779.

In addition, Klein also was sued by Skyline 27 La Quinta in 2001, alleging breach of contract; by Harold Zinkin in 2002, alleging breach of contract and by Long Beach Towne Center in 2005, alleging breach of a lease.

The outcomes of those cases was unclear.

One of the latest lawsuits against Klein involved a development currently under way. In 2005, Klein was sued by his longtime business associate Michael Cutbirth in connection with the Santa Maria Golf Community project in Santa Barbara County.

Cutbirth, of Rio Bravo Development Company, said he had done business with Klein over the course of 15 years and was approached in 2002 with the opportunity to acquire land surrounding the Santa Maria Golf Course. Cutbirth said Klein chose him largely because of Rio Bravo’s experience developing golf courses.

The pair negotiated an oral agreement, Cutbirth claimed, and planned to share equally in the project’s profits and risks.

Klein prepared an offer under the name Rio Bravo for the purchase of Rancho Santa Maria and negotiated a purchase price of $6.4 million, Cutbirth said.

“Unfortunately, Klein abused the trust that Cutbirth placed in him,” according to the suit. “In May 2003, Klein, without Cutbirth’s knowledge, furtively formed a Wyoming entity that was also called `Rio Bravo Development Company.”‘

Cutbirth claimed Klein did so “with the view of hijacking the Santa Maria deal for himself and cutting out Rio Bravo and Cutbirth.”

Cutbirth claimed breach of oral contract, breach of fiduciary duty, fraud and concealment, among other things.

Asked about the case, Klein chocked it up to a simple name dispute. He said he had settled the case and still is friends with Cutbirth.

Reached Tuesday at his home in Santa Barbara, Cutbirth confirmed that a conditional settlement had been reached and that there was no continuing animosity between the two.

He also said that, “under the right circumstances,” he would agree to do business with Klein again in the future.

Klein’s attorney, Paul Konapelsky, said the cases against his client are, far and wide, natural offshoots of doing business.

“The bigger you are, the more, unfortunately, you become involved in these sorts of things,” Konapelsky said. “If you look at any large builder or developer, the probability of not finding any lawsuit is slim and none.”

Robert Klein, 62, was named one of Time Magazine’s 100 people “who shape our lives” in 2005 for his work funding and passing Proposition 71, California’s stem-cell initiative. He was later named chairman of the California Institute for Regenerative Medicine.

Records show that Robert Klein was named conservator to his mother, Kris T. Evans, after he allegedly found her in a state of physical and mental deterioration in a mobile home in Northern California in May 1997.

In an attachment to a court petition for conservatorship, Robert claimed that he had believed his brother was “competently handling his mother’s affairs” until he received notice of her condition from Adult Protective Services and the manager of the mobile home park.

He said he tried to meet with Jeffrey about moving Evans into a nursing home but that, after several failed attempts, he drove to the mobile home himself.

“Upon arriving at the residence, petitioner found his mother disoriented and disheveled,” the conservator document stated. “The mobile home was littered with paper and in a deteriorated condition both inside and out.”

Later, he allegedly discovered that Jeffrey had – seven months earlier – executed agreements that allowed him to be named Evans’ attorney-in-fact, as well as the trustee of her living trust. The documents, signed by Evans on Nov. 15, 1996, and obtained by the newspaper, gave Jeffrey exclusive rights to handle his mother’s financial affairs.

Robert was named conservator and filed a San Mateo lawsuit against his younger brother in July 1998, on behalf of his mother’s estate. The lawsuit claimed elder and fiduciary abuse, fraud and conversion, among causes of action.

“At various times between October 1992 and July 1997, it was defendant Jeffrey S. Klein’s practice to write checks from plaintiff’s bank account to himself, and for the benefit of himself and others,” the suit stated. “These checks were written without plaintiff’s knowledge.”

Over that five-year period, Robert alleged that his brother had taken funds from their mother’s Bank of America account “in the sum of $593,500.25.”

In addition, the suit alleged that Jeff commingled his mother’s funds with his personal funds, agreed to sell her mobile home for $39,000 without her knowledge and received the proceeds of a $25,000 loan secured by his mother’s residence.

Jeffrey Klein acknowledged that he sold his mother’s property but said it was done with her permission. He said the rest of the lawsuit was pure fiction and blamed it on a family dispute over their father’s will 10 years earlier. He said he and his mother were cut out of the will, straining relations with his brother and prompting his mother to instruct Jeffrey to take his cut of the family money from her estate.

He said his mother wrote a letter with her explicit instructions when she was more lucid and that his brother, a Stanford-educated lawyer, simply took his penchant for litigation too far when he filed the suit.

Jeffrey Klein said the outrageousness of the allegations naturally invited press inquiries – he got calls about it when Robert was pushing Proposition 71 – but that the suit was nothing more than greed-induced misrepresentations.

Jeffrey Klein said he and his brother reached a confidential settlement and had made peace long ago. He urged the Press-Telegram to call Robert for further details.

Robert Klein could not be reached, although he told the San Jose Mercury News in 2005 that he “didn’t have a choice” but to sue his brother.

“I’m her conservator,” he was quoted as saying. “My mother has Alzheimer’s.”

City leverage

Gubner, the city’s outside counsel, said he, too, believed Klein’s family issues were borne of a dispute over a will and did not believe that Klein had done anything fraudulent in that case – or any other.

Gubner added that even if Klein closes the sale on the Queen Mary lease, the city still has significant leverage in deciding how things progress. And, at this point, he said, it may even be premature to assume Klein will be the one progressing them.

“The city does not intend to negotiate a developer’s agreement until after the sale closes,” Gubner said. “Regardless of who purchases the property, at the end of the day, (that entity) may not be the eventual owner.”